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Archive for the 'business of wine' Category

Apparently there’s a real rivalry among airlines for first class wine service–although you’d never guess it in the back of the bus where the wine selections are generally bad enough to drive a wine to beer.

A piece in Bloomberg details how Emirates has splashed out over $40 million a year on wine for the last twelve years. No comparative metric is given in the story (how much do other leading airlines spend on wine?) but it sounds like a big number to me.

Joost Heymeijer, who runs in-flight catering at the airline, details their buying strategy, which, interestingly, involves buying and then storing wines in a “Fort Knox-style” facility in Burgundy: The Emirates stash currently has almost 4 million bottles slumbering, some of which have escalated in value.

Sadly, that seems to be the point as Heymeijer said in the story: “It’s an investment. We look at it like a commodity.” Ugh. When they buy, they buy in 10,000 bottle lots, often from Champagne and Bordeaux. But they have even snapped up Burgundy, buying 2,000 cases of Corton-Charlemagne, cited as a tenth of the total production of the appellation.

They do pull some corks though, serving 9 million glasses of champagne last year, among other things. Check out the story for more details.

One amusing item appeared in the kicker. Asked about the Bordeaux 2015 vintage, Heymeijer replied “Not as good as 2010, but in Saint Emilion, Passat, and Margaux, it will be very good, probably better than the 2010.” Ah, yes, the renowned Passat appellation…probably a transcription error, but, yes, a case of top Bordeaux does sometimes go for about the same as a new Passat.Read more…

“Winery X, in family for generations, sold to billionaire” is a headline that would normally barely raise an eyebrow. But the winery in today’s news is Clos Rougeard from the Loire.

Located in Saumur, Clos Rougeard is the Bentley of the Loire. The wines, almost all red, are expensive, rare and of exceptional quality–the kind of wines that can turn haters of cabernet franc into ambassadors. (search for Clos Rougeard at retail)

The 27-acre estate was owned by the Foucault brothers Bernard (a.k.a. Nady) and Jean-Louis (known as Charly). They were the eighth generation to run the estate and made it a pioneer of organic viticulture in the area as well as hands-off winemaking.

After Charly’s death in 2015, La Revue de Vin de France reports, the family resolved to sell the domaine. The buyer is Martin Bouygues, French telecom billionaire and 481st richest person in the world.

In a way it is kind of surprising that a billionaire is attracted to the Loire, which is generally a region that favors low-key wines and hasn’t attracted big fortunes to be tossed around since the day of Francois I. Perhaps that is changing? Doubtful. Clos Rougeard is arguably the pearl of the Loire, now snatched up as bauble for a billionaire. But at least he is discerning! And the estate doubtless cost less than one in Musigny. Bouygues owns Chateau Montrose in Bordeaux.

LARVF doesn’t report on changes in the wine making.

UPDATE: Yes, another “Winery X sold to billionaire” story appeared today–at this rate, will there be any family-owned and operated top wineries by the end of the year?? Stan Kroenke, owner of Arsenal football club and the LA Rams and Screaming Eagle, is said to have bought a majority stake of Bonneau de Martray. [Decanter]

Coravin, the company formerly known as Wine Mosquito, has raised another $22 million in private equity funding. That brings the total equity sold to $40 million (plus another $3 million in debt). The lead investor of this round, closed on November 8, was not publicly disclosed. Neither were company revenues. Nor was the valuation.

The privately held company, based in Burlington, MA, sells a wine preservation/extraction device that uses a hollow needle to penetrate the cork of a wine bottle not unlike a mosquito if Bacchus designed mosquitoes. Over about 30 seconds, it injects argon gas to pressurize the bottle and then extracts a glass of wine without removing the cork. The device lists for about $300 retail and replacement argon canisters list at $18 a pair. That’s enough argon for about 30 glasses of wine.

While this price is low for restaurants compared to many by-the-glass systems, it does seem steep for consumers. Nonetheless, the company continues to raise capital at an astonishing clip. Sales were briefly halted in 2014 after complaints of exploding wine bottles. The company now recommends using a “wine bottle sleeve” when opening bottles.

The parody Twitter account @shitmysommsays recently tweeted “If you need a Coravin at home, you need more friends.”

The last company in the wine space to raise this much private equity was Lot 18, which raised $33 million in 2011.

UPDATE: Vivino, a wine app developer, raised $25,099,884 in private equity funding in January of this year.

Daniel Johnnes may be the closest thing the American wine world has to Burgundy royalty. Yesterday he announced that he has joined Grand Cru Selections, an importer and wholesaler based in New York City, as a partner. It’s a big move, if somewhat “inside baseball.”

“This is an opportunity to be a partner in a young and dynamic company that I didn’t want to pass up,” he said by phone.

Johnnes, 60, helped pique America’s interest in Burgundy wines When he was a sommelier at the erstwhile restaurant Montrachet in the early 1990s, he hosted winemaker dinners with the likes of Christophe Roumier and Dominique Lafon that encouraged American collectors to add Burgundy to their cellars. In 2000, he tapped his connections in Burgundy to hold the first “La Paulée de New York.” This bacchanal now alternates annually between NYC and SF and is marked in red on the calendar of collectors. It also functions as a sort of “Burgundy university” for the sommeliers who work the event. Johnnes brokers a number of wines including Roumier and Lafon that he will be bringing to Grand Cru. He was #4 on our NYC wine power list a few years back. He currently is spending a year in Lyons.

Grand Cru Selections was started in 2010. Ned Benedict, a founding partner, said of their strategy: “we’re trying to build a really well-conceived portfolio of wines. Burgundy is obviously really close to all of our hearts.” But, he underscored, “we’re not trying to become a house of Burgundy–other regions are very important to us too.” Their portfolio includes the wines of J.L. Chave, Marquis d’Angerville, and nine wines from Piedmont, among others.

Charles Banks, a former owner of Screaming Eagle whose current wine and hospitality holdings have been pegged at $200 million, was indicted in federal court today on two counts of fraud. Banks, 48, is accused of defrauding Tim Duncan, the NBA legend, of $20 million in investments.

The indictment was unsealed Friday in a San Antonio courtroom, where Banks surrendered himself and was led into the courtroom in handcuffs. Banks surrendered his passport and a $1 million bond was issued for his release pending trial. He is facing a potential maximum sentence of 25 years in federal detainment.

The FBI has been investigating Banks for a year. The SEC later filed suit against Banks in Atlanta where he resides accusing the financial adviser of defrauding investors.

Banks has amassed a global portfolio of wines under his Terroir Capital that includes Mayacamas of Napa Valley, Qupé of Santa Barbara and Wind Gap of Sonoma. The company was a founding partner in Sandhi, though that stake was sold earlier this year.

Banks had previously denied wrongdoing, telling Forbes in January, “We are proceeding aggressively to have [Duncan’s] claims litigated.” Banks was released after posting $50,000, five percent of the $1 million bail set in his case.

Vietti, the Barolo winery founded in 1893 and known for its single-vineyard wines, has been sold to the American Kyle J. Krause. According to Wine Spectator, the sale includes the winery in Barolo’s Castiglione Falleto, the brand and 84 acres of vineyards. Luca Currado, enologist and current head of the winery, will be staying on as CEO. The parties did not reveal the price paid.

The story is a curious since top vineyards in Barolo generally get sold to…people in Barolo. Perhaps the increased interest in the wines of Barolo is driving international investor interest in seeking real estate plays or trophy wineries. In any event, the recent dollar strength certainly helps American buyers. And the prices they are willing to pay are now high enough to pry the keys to the cellar out of the hands of some locals. Either way, Vietti seemed to really be on a roll with their wines and I am surprised to learn that they have sold.

Kyle Krause owns a chain of convenience stores based in Iowa known as Kum & Go. (The corporate umbrella of Krause Holdings includes Solar Transport, a hauler of refined fuel and the Des Moines Menace, a team in the fourth tier of the American pro soccer pyramid). It’s hard to imagine Vietti on the shelves of a convenience store but if that happens, it will certainly give Kum & Go a leg up over 7-Eleven’s wines! With 400 stores in 11 states and $2.1 billion in revenue, Kum & Go ranks 163rd in private companies in the US according to Forbes. It was founded in 1959 by William Krause as Hampton Oil Company.

Krause and has wife Sharon have five children. Krause told Wine Spectator that “My mother’s family is Italian and I have always had a passion for Italy and for Barolo.” He has been acquisitive in Barolo, purchasing some 30 acres of vineyards last year, though not always emerging as a successful bidder. The other sites Krause owns in Barolo will now be folded into Vietti. Currado says they will increase the quality of Perbacco, their Langhe Nebbiolo. Hopefully it will remain the great buy that it is today. The Barberas are also excellent values.

Tumult (anarchy?) is the current state of the main political parties in Britain after the Brexit referendum. Will the vote to exit the EU leave the British wine trade in any better shape than the political parties?

By way of background, the UK was, pre-Brexit vote, one of the bright stars in the wine world. While consumption has been slowing in the main producing countries of France, Italy and Spain for some time now, the UK was heading in the opposite direction: the wine market is vibrant, diverse, growing and by some measures, the second still wine market to the US. Somewhat astonishingly, a recent survey by the wine trade group WSTA showed wine as “the most popular alcoholic drink in the country.”

Post-referendum, the pound Sterling has fallen to 35 year lows against the dollar and tumbled nine percent against the euro (and even more as jitters about Brexit gripped the currency market earlier in the year). Historically, wine was one of the things par excellence that the British traded for: Adam Smith observed this in his example of “wine for wool” highlighting the comparative advantage of nations. (More recently, England has seen a domestic wine industry emerge but it is still not enough quantity at low enough prices to slake the thirst of British.) So the quick take is that Riojas, Burgundies, Baroli, and all other euro-denominated wines just got nine percent more expensive. (The currency-related price increases may take several months to filter through until existing inventories need to be refreshed at the new currency levels but preliminary reports indicate it is already being felt in France.) With 80% of wine in the UK sold at retail and much of that at thin margins, the consumer will feel the brunt of the currency impacts.

Over half of the price of the average bottle of wine in the UK is tax, so the government could conceivably cut the wine tax to offset the currency effect. But since HM Treasury is as desperate for revenue as most treasuries, that is highly unlikely especially since wine brings in £8.6 billion to the public purse.

There is, of course, the human element too and many non-British EU citizens live in Britain and work in the wine trade. London is a hotbed for restaurants and there are many non-British EU citizens who work as sommeliers. Their futures are all up in the air now.

The uncertainty following the referendum has sent the pound plummeting and many economic forecasters now see a recession looming for Britain. In the end, since the referendum was only advisory, and there’s been a wave of resignations among the political class, there’s a fair chance that no politician will actually trigger Article 50, which starts the clock and makes inevitable Britain’s departure from the EU. And if, in the delay, the economy suffers, British unity itself is under risk, new leadership emerges that can better articulate the cause for “remain,” there could be calls to rethink and “Bremain.”

With all the uncertainty, the Brits could certainly use a glass or two of wine. But whether they will continue to reach for it with such enthusiasm remains to be seen.